Compliance consultants advise businesses and companies on complying with government, professional, and safety regulations. Their work is sensitive because they must ensure that all business procedures and processes of their clients comply with laws and regulations. Compliance consultants also ensure that their client's operations comply with internal standard operating procedures. Without a compliance consultant, businesses could be exposed to potential damages and fines if they violate laws.
Given the serious nature of compliance consulting, whether a consulting firm or an individual practitioner, insurance for compliance consultants is a must. Mistakes may cause financial losses for the customer, leading to a devastating lawsuit against the consultant. It can also jeopardize a person's career and damage a thriving business of a compliance firm. Insurance for compliance consultants can protect companies and individuals from legal expenses, damages incurred for causing their clients' financial loss, injury, property damage, and other unexpected costs.
Risks and Liabilities of Compliance Consultants
The business and its employees are exposed to several risks and liabilities in compliance consulting.
- For instance, a compliance consultant may miss a safety infraction for a client's operation which results in the client being fined by OSHA.
- A situation in which a consultant gives incorrect advice to a client. The client company proceeds based on that advice only to find itself subject to fines and penalties that they expect the consultant to pay.
- Cyber compliance consultants may be held responsible if they miss recommending a safety or preventative measure that would have avoided the resulting data breach.
- A business consultant's efficiency recommendation to increase sales for his client backfires resulting in a reduction of sales and gross revenue.
- A business consulting firm's employee is injured on the job
So you see, there is a need to buy insurance to help the business sail through such financial setbacks.
Recommended Coverage for Compliance Consultants
There are many types of coverage that would benefit Compliance Consulting firms. Some of these include:
Professional Liability
Also known as "errors and omissions insurance," this policy provides a legal defense if a client or other third party sues for a financial loss caused by the consultants professional service. A small mistake by a consulting firm can cause a huge financial setback for the client and damage their reputation. The client can file an expensive lawsuit against the consulting firm. Professional liability insurance offers coverage for financial losses to third parties resuting due to errors, ommissions, undelivered services, and accusations of negligence.
Clients want to know whether the consulting firm has the right coverage for any harm caused by the consultant's negligence. Indemnity is the foundation of most business insurance policies. It is a commitment between the insurer and the consulting firm wherein the insurer will compensate the harmed party for covered losses during the policy period. In the case of professional liability, the insurer pays for the policyholder's legal liability for financial loss arising from negligence in providing the service.
It's important to note that Professional Liability does not pay for physical bodily injury or property damage caused by the consulting company, General Liability is available for these types of claims.
Fidelity Bonds
Fidelity bonds and employee dishonesty coverage provide reimbursement to the employer if one of the employees steals from the employer. These can also cover employee dishonesty relating to a loss suffered by the employer's client. Often referred to as employee dishonesty or crime, these bonds provide coverage if an employee commits theft or fraud, electronic funds transfer, or unlawful data access from within a compliance consultancy firm.
However, unlike insurance, Surety companies that pay claims under this coverage would then pursue reimbursement from the employee that committed the crime. Fidelity bonds can provide both first-party and third-party coverage. First-party fidelity bonds provide coverage if an employee steals from their own company. In contrast, third-party fidelity bonds provide coverage if employees steal from clients.
General Liability
This policy provides coverage for common risks such as bodily injury, damage to others' property, and personal and advertising injury. For instance, if one of the employees accidentally damages a client's property, the consulting firm could be held liable. The General Liability carrier would respond to this third-party property damage claim.
General liability insurance provides coverage for legal expenses and expenses for repairing or replacing damaged property. There could also be a slip-and-fall accident involving a client at the office. This insurance will pay for the client's damages from medical costs, lost work, and suffering from the injury when the firm is legally liable.
Business Owner's Policy
A business owner's policy (BOP) is economical and provides comprehensive coverage for compliance consultants. It combines both general liability insurance and commercial property insurance. A BOP will pay for damages or replacement of buildings, contents, and equipment in case of a fire, wind damage, or theft, among other covered perils. General liability will also provide coverage against customer injuries and property damage, slander, and advertising injuries.
The BOP policy comes in handy for paying medical bills if someone gets physically hurt at your office. If a client slips on the wet floor in the bathroom and breaks their elbow, they then sue your firm, the general liability handles it. In the event of a fallen laptop, this policy will help pay for the repair or the replacement of the laptop. In most cases, a business eligibiliy for a BOP depends on the insurance carrier being asked for a quote. The eligibility guidelines vary for each insurance company. If not eligible for a BOP, a business can always get a Commercial Package Policy which will also provide both Property and General Liability insurance with the ability to package other lines of insurance.
Cyber Liability
Cyber insurance pays to defend liability claims or suits from clients whose data was breached or harmed from a cyber-attack. It saves the business from the financial burden of defending itself in case sensitive data gets stolen, such as clients' social security numbers, credit card numbers, and personal details.
Cyber nsurance for compliance consultants can include first-party and third-party coverage. First-party cyber insurance provides coverage for the insured business' losses from damage to networks, computers, fines, expenses, and loss of income resulting from a cyber-incident. These policies are highly customizable, so ensure you get the coverage your business needs for cyber crimes against it.
Workers' Compensation
This type of insurance is required in most states for consulting firms with a specific number employees. This insurance pays on behalf of the employer for lost wages when employees cannot work due to a work injury. It also pays for all medically necessary treatment for the employee's injury and funeral expenses in case of fatal accidents.
Cost of Insurance for Compliance Consultants
A variety of factors contribute to the cost of insurance for compliance consultants, including:
- Type of consulting services offered
- Values of business assets insured
- Annual income
- Location
- Annual Payroll
Summary
Having insurance for compliance consultants is a must considering the professional nature of their work. A single mistake can cost clients millions of dollars, which could lead to liability lawsuits against consultants.
Therefore, insurance provides a cushion to overcome such unexpected shocks smoothly, giving peace of mind. However, when choosing a policy, thoroughly read all the features, terms, and conditions and then arrive at a decision. Consider enlisting the help of a licensed insurance agent or visiting Insurance Advisor for more information.